Many engineering firms are facing a market with a shrinking supply of talent.

Coupled with an aging

workforce, the problem of having a sufficient inventory of capable engineers and project managers
available and/or working on projects is of significant concern. The following case study identifies the
insights and actionable decision recommendations that emerged from the role analytics played in a
large engineering firm experiencing critical talent turnover.

The firm has over 10,000 employees and is headquartered in the United States with offices in several
countries around the world. It has operations in business areas including industrial products, processing,
and government. Over the last two years the firm has been experiencing unwanted voluntary turnover,
increased retirement rates, and mediocre business performance. The CHRO recently approved a pilot
analytics project to identify solutions. The project duration was three months and the firm enlisted the
support of OptTek Systems to assist the internal staff.

Talent, financial, and related data were assembled from a number of computer-based businesses and
HR systems, interviews were held with leaders from the global offices, and models were built
representing the workforce behavior at the individual employee level by implementing its OptForce
analytics software platform. The models were tested for validity and were used for the ensuing analyses.
The following is a summary of the deliverables:

Turnover rates of the high-risk critical roles of Engineers and Project Managers are higher than average
(14% and 13% respectively). This leads to high turnover costs over $10 million in the past year for
Engineers and over $8 million for Project Managers. Furthermore, over the last two years turnover rates
have been increasing among employees with fewer years of service. Even if the cost assumptions are
over-estimated, the costs are significant enough to take action. Additionally, demand for Project
Managers is expected to grow, and Engineers are the primary feeder role for Project Managers, making
the voluntary turnover of Engineers even more costly. Further compounding the costly turnover risks,
the demand forecast based on projected revenues is greater than the demand forecast based on current
trends in headcount, meaning that there are likely to be larger critical role talent gaps in the future; as a
result, the firm may not be able to meet its revenue goals.

Insight #1
The predictive modeling capabilities of OptForce allow employee behavior to be modeled so
that interventions may be compared and their ROI evaluated. OptForce predictions showed
that under the status quo, about 100 Engineers are expected to leave the organization over the
next 12 months, at a cost of approximately $8 Million. Currently, there are roughly 200
Engineers with 1-3 years of service; if the Company can achieve a reduction in turnover rates
among these employees over the next year, then any program which achieves this reduction
and yields a positive ROI should be implemented. For example, lets analyze the value of a
modified compensation plan that could yield such improvements in turnover.

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 Let us consider Engineers with 1-3 Years of Service (YOS). The impact of their most recent salary
raise on their turnover is shown in the chart below.

Chart showing the effect of the most recent raise

on turnover of Engineers with 1-3 YOS

The average annual salary of Engineers with 1-3 YOS is approximately $70K; a 5% raise is
therefore $3,500, while a 2% raise is $1,400 a difference of $2,100. Based on the data shown
in the chart, Engineers who got a 5% raise are retained at a rate that is at least 4% higher than
those who got a 2% raise. With an average turnover cost of $80K per Engineer, a 4% increase in
the annual retention rate would save the Company $3,200, a net savings of $1,100 per Engineer
per year.

Recommendation #1:
These results indicate there is a relationship between compensation and turnover; therefore
the firm should consider reviewing their career plans with an eye on increasing raises in
compensation in critical roles.

Insight #2
Of all Engineers with 1-3 years of service, those who have taken at least one leadership training
course have a 10% higher annual retention rate (89% vs. 79%). Since the average turnover cost
of 1-3 YOS Engineers is $80K, if training costs less than $8,000 per employee it yields a positive
ROI (assuming a 10% gain in retention).

Recommendation #2:
Consider investing in more leadership training and other development programs and integrate
with career planning. Emphasis should be placed on those engineers with career plans leading
to project management. Identifying high-potential engineers and communicating clear career
path opportunities to them is also recommended.

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 Insight #3
Building the workforce model for the firm has resulted in a computer-based capability that is
highly representative of the behavior of talent, especially for the critical roles identified. This
digital model enables rapid, customized, as well as structured report generation with a high
visualization value through the software portal provided. This capability will save significant
preparation time and will permit that time to be used for other responsibilities.

Recommendation #3:
Acquire the analytics capability and its integrated training program to orient users on how to
pull data from the model as needed; each user can have a customized dashboard and
visualization graphics built to their requirements.

While this project was only a pilot, other areas of focus where future performance could be improved
were identified. Recruitment channels can be analyzed more thoroughly with regard to turnover and
high performing talent in order to reduce costs and optimize recruiting strategies. An analysis of
mobility can also offer potential gains via cost reduction and minimizing turnover.

As this project moves beyond the pilot phase, the savings generated will be significantly greater than
their cost. It will also deliver a platform for HR to more deeply engage its finance and operations
partners, thereby enhancing strategic planning and business performance.

Lets Talk About Optimizing

Your Workforce

Jay April, Ph.D.

Chief Development Officer
303.447.3255 ext 104
april@OptTek.com

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